Real estate is one of the few assets that can be acquired on credit, and that is where its main interest lies . Because to build and develop your assets, you need to optimize both levers: savings capacity (to invest in life insurance and the stock market in particular) and debt capacity (for real estate investment). Thus, when you have little savings capacity, buying your main residence is often the only way to build up assets.
But there are many other real estate investment solutions that we will compare: with credit leverage or not, in active management (classic rental real estate) or passive (brick-and-mortar), commercial or residential real estate . Explanations.
Comparison of different ways to invest in real estate
French people who want to invest in real estate generally think of the classic “hard” rental investment. But there are other solutions for investing in real estate, starting with “paper-brick” : SCPIs (Real Estate Investment Companies to become an associated owner of a real estate portfolio and receive rents), crowdfunding (participatory financing of real estate projects) and SIICs (Listed Real Estate Investment Companies).
All the solutions for investing in real estate
In this table we compare the different solutions for investing in real estate. This way, you will have a complete vision of real estate and all the criteria to evaluate for investing . In the rest of the article, we develop each investment solution in detail
There are 3 main families of real estate investment :
real estate for enjoyment : main residence and secondary residence ( buy or rent? );
classic rental property : become a lessor in unfurnished rental (default regime) or furnished rental (LMNP) , in tax-exempt real estate in old ( Denormandie ) or new ( Pinel );
Real estate stone-paper : delegate management thanks to SCPI , real estate crowdfunding and SIIC . Ideal for diversifying and obtaining income without managing personally.
How to choose between the various real estate investment solutions?
Let’s put aside the real estate of enjoyment (main or secondary residence), and first talk about real estate investment. How to choose between classic rental investment (housing put up for rent) or real estate stone-paper (SCPI and crowdfunding in particular)?
Investing in traditional rental property
When you invest in traditional rental property, you become a landlord with the responsibilities that come with it towards tenants. And you have rights and duties under the law. You have to invest more AND invest yourself personally .
You are therefore responsible for purchasing your real estate, rental management (visits, inventory reports, regularization of charges, general meetings, etc.), tax declarations, maintenance and work.
And the risk (deterioration, unpaid rent, rental vacancies, decline in the local market) is very concentrated compared to real estate, unless you are sufficiently wealthy to diversify across several buildings.
Bare or furnished rental?
By default, if we do not choose any tax system, we do bare rental, that is to say unfurnished rental. In this case, except in the case of a land deficit, the taxation will be heavy.
Tax-wise, we are taxed on a basis of 70% of property income (because of a flat-rate deduction of 30%), or, by choice, on a basis of property income reduced by actual costs. And our tax rate can go up to 45% of this basis, depending on our marginal tax bracket (TMI) . Not to mention the 17.2% of social security contributions to be added and the property tax!
Investing wisely with turnkey LMNP furnished accommodation?
In our opinion, investing with LMNP status is much more interesting (rather than bare rental), for better profitability. See our practical case file: investing in LMNP .
Please note, we are not talking about LMNP managed in a service residence for students, vacationers, or the elderly. Too risky, because the lease is generally guaranteed for 9 years by a manager, but then you find yourself tied hand and foot to the operating manager, who often demands costly work and rent reductions to continue renting, or who asks you to sell at a very low price. On the other hand, a company specializing in turnkey rental investment can provide comfort and real added value.